Ex-communist Europe

Slovakia's new government

Vague, but probably austere

TWO months after a crushing win in Slovakia's general election, Robert Fico, the new prime minister, has found a Europe that is changing rather to his taste. Unveiling his centre-left government's programme last week, Mr Fico said: "consolidation of public finances is impossible without economic growth and job creation".

François Hollande, who at the time of Mr Fico's programme launch was on the brink of victory in France's presidential election, could not have put it any better. As the scales in the euro zone's grand austerity v growth debate begin to tip leftwards, Mr Fico is likely to find the political air in Europe considerably easier to breathe than it was just a few months ago.

The government's programme does suggest that Mr Fico needs to polish up his act a little. The document is long on assurances that it wants to "strengthen" the role of the state. But it contains few details or numbers. Critics sneer that it gives most new ministers a completely free hand.

That seems unlikely. Mr Fico has inherited an economy in free fall. Assuming it survives the scepticism of Mr Hollande, the new fiscal compact for the euro zone requires Slovakia to slash its budget deficit to under 3% of GDP by the end of next year. But this year's deficit is now forecast to reach 5.2%, against a target of 4.8%. If Mr Fico is to make good on his pledges to be an upright European, that will require his social-democratic Smer party to take an even more ruthless approach to austerity than the centre-right administration it replaced.

"Fico is a pragmatist," says one cabinet member. "He has tremendous social empathy, but he will grit his teeth and do what needs to be done... in good time for his party to recover before the next election."

The flagship policy of previous centre-right governments, the 19% flat tax on personal and corporate income, is unlikely to survive unscathed. Before the election Mr Fico vowed to replace it with 22% and 25% rates for higher-income groups and firms. But the finance ministry, led by Peter Kažimír, a respected if bland technocrat, is keeping its plans under wraps. What will happen to bank levies, or the private element of the pension system, also remains unclear.

The good news is that Mr Fico's blueprint shows some signs of creativity. His government is considering launching public-housing projects, and providing subsidies to combat joblessness among under-29s. At 35.1%, Slovakia's youth-unemployment rate is one of the highest in the EU.

The government's opponents have attacked the plan for its obfuscation. Some of them, such as Miroslav Beblavý, an economist and MP for the opposition SDKÚ, say that Smer will struggle to implement even its more reasonable proposals, such as its plans for housing. Mr Beblavý, a former deputy minister, also worries that Mr Fico may do particular damage in education and social inclusion. The manifesto hardly mentions Slovakia's troubled Roma minority, for example.

Previous Slovak governments have not always been reliable euro-zone partners. The centre-right coalition that Mr Fico ousted refused to back the first Greek bail-out, in 2010, and lost formal power last year when it could not agree to support an expansion of the euro zone's main bail-out fund.

But Mr Fico clearly wants to take a different approach. Speaking at the Slovak Atlantic Commission's recent Globsec conference, he gushed about the importance of European solidarity in times of crisis. Pavol Paška, chair of the Slovak parliament, said yesterday that the government will not suffer from "Euro-sclerosis."

Thanks in part to such soothing rhetoric, markets appear unruffled. And although the feisty Mr Fico has tacked sharply to the left during both of his stints in opposition, he has a track record of euro-enthusiasm. Observers recall his first government's smooth delivery of Slovakia into the euro zone in 2009. And his emphasis on the need for growth comes when much of Europe is starting to lean the same way.

What about the opposition? The centre-right remains in disarray after its electoral humiliation. There are rumours that Daniel Lipšic, the former interior minister, is wooing Iveta Radičová, the ex-prime minister, to begin a new party. But media reports suggest that the Tatra tigress is unimpressed.

Perhaps the most worrying element of Mr Fico's four-year plan is that it has little to say about the judiciary. After having demolished his rivals at the ballot box thanks in no small part to the "Gorilla" public-procurement scandal, the new prime minister pledged to extinguish the sour smell of corruption. But in an unusually hot and humid Bratislava, the air is yet to lift.

Readers' comments

"Economy in freefall" isn't a fair way of describing a country whose GDP is forecast to grow 2.4% this year, and which grew 3.3% in 2011, 4.2% in 2010 (IMF).

The economy is already 2% larger than the pre-recession peak. Slovakia is probably the most dynamic economy in the eurozone - and far outperforms the UK or US. Naturally, it ought to: Slovakia is in catch up mode - and is catching up fast. Just a few km from rich Vienna, at the heart of European auto manufacture, with a highly skilled workforce, very competitive tax system, very little corruption, efficient courts, very low debt and no currency risk, Slovakia has plenty going for it.

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"...very little corruption, efficient courts, very low debt..."
Funny, I live here and I see these three points completely different.
Very big corruption, UNefficient courts and pretty big debt already.